Charity care shrinking at central Ohio's nonprofit hospitals

Saturday

Central Ohio's nonprofit hospitals receive hundreds of millions of dollars in tax breaks each year. But the traditional justification for those exemptions is fading rapidly.

Central Ohio’s nonprofit hospitals receive hundreds of millions of dollars in tax breaks each year. But the traditional justification for those exemptions is fading rapidly.

For decades, caring for the poor without expectation of payment served as the primary basis for tax breaks provided to hospitals. But Ohio's Medicaid expansion has shaken that foundation, reducing the charity-care burden by nearly half in just two years, a “Dispatch” analysis found.

The amount of charity care provided at central Ohio’s four hospital systems dropped to $107 million in their most recent fiscal year from $194 million two years earlier. Net community benefit stayed virtually unchanged at $651 million.

The proportion of hospital spending that directly benefits the broader community varies greatly among institutions, and in recent years squabbles over whether nonprofit hospitals should pay property taxes have broken out in states such as New Jersey, Illinois and Pennsylvania.

Nonprofit hospitals in Ohio aren’t required to justify their tax breaks. But OhioHealth and Mount Carmel say they still earn them, despite the decline in charity care. Net community benefit increased by $20 million at OhioHealth from two years earlier, and by $10 million at Mount Carmel.

OhioHealth has an outside consultant review its community benefit annually to ensure that it exceeds the value of its tax break. In OhioHealth’s 2015 fiscal year, its net community benefit totaled $279 million, while the value of its tax breaks was $183 million.

Although OhioHealth is devoting a smaller percentage of its spending to community benefit, it also has seen its profit margins shrink. It expects its operating surplus to be about 6 percent in its current fiscal year, down from 8.5 percent three years earlier.

Nathan VanLaningham, the hospital system's senior vice president of finance, takes a broader view of how the hospital system is reinvesting in the community.

He noted OhioHealth’s recent investment of roughly $230 million for a new electronic health-records system that will coordinate care across its network of hospitals from Marion to Athens. The hospital system also wants to operate a mobile stroke ambulance in Columbus and has invested about $300 million in a neuroscience center at Riverside Methodist Hospital.

“We are using all of those excess resources to improve the quality of care we provide,” VanLaningham said.

OhioHealth and other hospitals that primarily serve adults also recently saw government payments for Medicaid outpatient services reduced by 5 percent, widening the shortfall in reimbursement for each Medicaid patient.

That wasn’t the case at Nationwide Children’s Hospital. Thanks to more efficient operations, the pediatric hospital erased its Medicaid shortfall in 2014 and, largely as a result, saw its net community benefit shrink to $97.3 million from $122 million the previous year.

“We see all kids regardless of the ability to pay. There is never anyone denied care,” the hospital’s chief financial officer, Tim Robinson, said this month. “The fact we’re (delivering care) more efficiently doesn’t make us less of a nonprofit.”

Hospital officials credit expanded services for asthma patients, for example, as a reason for a 14 percent decline in this fiscal year in asthma-related emergency department visits among those children at highest risk. The hospital expanded its school-based asthma therapy program to 90 schools in 2015 from 17 in 2013.

Such spending isn’t always a true or complete reflection of how effectively a hospital’s service extends beyond its walls. And community benefit doesn't include patients' bad debt, which topped $1 billion at hospitals statewide in 2013, according to the Ohio Hospital Association.

Mount Carmel, which plans to close its hospital in Franklinton in 2018, said it has seen “ exponential” growth in its Healthy Living Center on that hospital's campus. The center, which has a demonstration kitchen, offers classes geared toward educating people about how best to buy, store and prepare healthful food.

Visits to the center are on track to exceed the previous fiscal year’s total by 38 percent, said Brian Pierson, Mount Carmel’s regional director of community outreach.

Ohio State University’s work with the Kirwan Institute to map baseline health information across the city has been slow to get off the ground because of technology issues, said Wanda Dillard, director of community development at the university’s Wexner Medical Center. That effort is a key step toward outlining measurable goals to improve community health.

In June, the hospital systems plan to issue a joint plan outlining how they’ll join forces to address Franklin County’s greatest unmet health care needs over the next three years.

bsutherly@dispatch.com

@BenSutherly

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